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My startup was offered this by a very well known large enterprise. We said no because they would have insight on what we do with our other customers (their comp

My startup was offered this by a very well known large enterprise. We said no because they would have insight on what we do with our other customers (their competitors). We sought the council of several lawyers and law firms in the valley and every single one told us to walk away immediately. An infant startup should do whatever it takes to keep the legalities as clean as possible. If your situation was similar to ours, your customer is bound to try to put IP ownership language in the contract. If you are seeking future investment, this can quickly make potential investors run away. Take it as a compliment that they want your technology very badly to make such an offer. You should try to talk to their competitors immediately to get some validation and try to sell to them at the same time. Never indicate that they are your only customer. If you're a startup, try to win a market. Do not develop bespoke technology for a handful of major players. You will quickly find out that you are beholden to them. I'd be happy to tell you more of our experience if you'd like (email me)

wheresmycraisin 6y ago
Thanks for your response. Yes, I didn't really want to be thinking about complicating the legal structure this early. We've made it clear to them that our complete ownership of the IP is non-negotiable, and they haven't challenged it. That doesn't preclude them from trying something legally clever obviously, but we would get any contracts reviewed by our own lawyers. The scaring-away of other investors is a strong concern, though we don't plan on raising funding... not sure if a VC would raise eyebrows if 5-10% has already been carved out, even if it were done cleanly. Also, I'm hoping they won't ask for access to our communications and plans with other customers. That has not come up. Actually we did talk about us selling to their competitors, and they claimed, because they have multiple business arms, a lot of our other customers will also be their customers. It's hard to figure out how true this is. I'll definitely take you up on your offer after I digest the situation more, thanks!
tixocloud 6y ago
That's an interesting scenario. Does the well known large enterprise have a venture arm? We see a plethora of corporate venture firms who are intrigued by what we're working on. For us to work with them to get access to a larger customer base seems appealing but I wonder if it would create issues later down the line.
- mbalex99 6y ago
  A late response. They do not have a corporate venture arm.
fakedang 6y ago
The top paragraph is really good advice that I would have appreciated back in the day we were starting up (at my former startup). In the end, in the name of "aligning our interests", they forced us to work exclusively with them, follow their protocols and nothing else, work on a single code base, etc. In the end, everyone was just so frustrated, we decided to ditch it to them instead at a less than stellar expected valuation.

wheresmycraisin 6y ago

Thanks for your response. Yes, I didn't really want to be thinking about complicating the legal structure this early. We've made it clear to them that our complete ownership of the IP is non-negotiable, and they haven't challenged it. That doesn't preclude them from trying something legally clever obviously, but we would get any contracts reviewed by our own lawyers. The scaring-away of other investors is a strong concern, though we don't plan on raising funding... not sure if a VC would raise eyebrows if 5-10% has already been carved out, even if it were done cleanly. Also, I'm hoping they won't ask for access to our communications and plans with other customers. That has not come up. Actually we did talk about us selling to their competitors, and they claimed, because they have multiple business arms, a lot of our other customers will also be their customers. It's hard to figure out how true this is. I'll definitely take you up on your offer after I digest the situation more, thanks!

tixocloud 6y ago

That's an interesting scenario. Does the well known large enterprise have a venture arm? We see a plethora of corporate venture firms who are intrigued by what we're working on. For us to work with them to get access to a larger customer base seems appealing but I wonder if it would create issues later down the line.

mbalex99 6y ago
A late response. They do not have a corporate venture arm.

fakedang 6y ago

The top paragraph is really good advice that I would have appreciated back in the day we were starting up (at my former startup). In the end, in the name of "aligning our interests", they forced us to work exclusively with them, follow their protocols and nothing else, work on a single code base, etc. In the end, everyone was just so frustrated, we decided to ditch it to them instead at a less than stellar expected valuation.